Preliminary discovery: not enough information to commence a proceeding?

Prior to the commencement of legal proceedings, a prospective litigant may apply to the Federal Court of Australia for orders for preliminary discovery of documents from a prospective respondent. The purpose of this is to enable the prospective litigant to determine whether it has a cause of action, or to ascertain the correct respondent in relation to a cause of action.

“(1) A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant:

(a) reasonably believes that the prospective applicant may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and

(b) after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

(c) reasonably believes that:

(i) the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and

(ii) inspection of the documents by the prospective applicant would assist in making the decision.

(2) If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1)(c)(i).”

For rule 7.23(1)(a) to be invoked, the prospective applicant must reasonably believe that they may have, not categorically that they do have, a right to relief. The Court in Pfizer cautioned against interpreting the rule by substituting the word “belief” with words such as “suspicion” or “speculation” in order to understand the rule. This, in the Court’s opinion, would lead to evidence and argument that would detract from what actually needs to be considered in such an application. The Court in Pfizer confirmed that any determination would be based on evidence of the prospective applicant’s belief only at the time of making the application. Further, at [65] the Court provided a summary of the principles which should be applied when determining an application for preliminary discovery:

The test of reasonable belief is an objective test.

The provision does not allow for third party discovery, i.e. an order may be made only against that person who the applicant reasonably believes it has a cause of action.

If the only reason why an applicant does not have the information to decide whether to commence a proceeding is because the applicant lacks sufficient information about the respondent’s capacity to satisfy a judgment, preliminary discovery will not be available.

The extent of the discovery which should be ordered should be enough information to enable a decision to be made about commencing a proceeding, but no more than that which is necessary.

The stronger the evidence already available to an applicant in respect of its right to obtain relief, the weaker its position will be to obtain preliminary discovery.

Due to the intrusive nature of preliminary discovery, the applicant is obliged to place before the court all of the information and evidence already available to it. The applicant must not hold back information.

While the notion of reasonable belief may set the threshold “at quite a low level”, there must be some tangible support that takes the existence of the alleged right beyond mere “belief” or “assertion” by the applicant.

Takeaway points

Preliminary discovery will be available for a prospective litigant who holds a reasonable belief that a cause of action may be available against a prospective respondent but, for reasons outside of their control, are unable to sufficiently support that position. Rule 7.23 should be beneficially construed and given the fullest scope its language will allow. There does not appear to be any limit to the types of potential matters that preliminary discovery can be made by a prospective applicant. Common examples of matters include claims for breach of trade secrets, patents, and intellectual property matters where a particular ingredient/methodology/process is not available in the public domain and would be the foundation for the dispute.